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Penalties will recommence: ATO restarting debt recovery action

Taxpayers defaulting on tax debts and lodgement requirements can soon expect contact from the ATO as it confirms the recommencement of its compliance actions in the wake of JobKeeper concluding.

With the JobKeeper package formally over, the Tax Office has now confirmed that it will resume chasing and enforcing debt recovery action.

The change comes after the ATO started sending letters to taxpayers in February to warn them of possible stricter action if they failed to make good on their obligations and had refused to contact the Tax Office.

After the 31st March 2021, where appropriate, the imposition of penalties will restart. Per each case-by-case basis, the ATO will start taking debt and lodgement compliance actions.

This renewal of action from the ATO comes after it had held off its debt, audit and lodgement work at the peak of COVID-19, finally contributing to a $1.3 billion shortfall against its compliance revenue target.

With an increasing $53 billion debt book to account for, accountants have correctly anticipated that the ATO would turn to tougher enforcement once JobKeeper ended.

The ATO, however, has advised practitioners and their clients that stern action will not be taken if they reach out for help and also assured that they will always provide help and assistance to anyone who engages with them. The ATO generally does not take compliance action when they are aware that people are trying to do the right thing.

The ATO was always looking to return to business-as-usual to prevent debt issues from growing. It’s appropriate that this recommences now because the zombie firms have been maintained by JobKeeper and it’s now a case of dealing with reality.

It is best that people get on the front foot, and when the debt notices are received, don’t ignore them. Advise the ATO of your circumstances, and then look at the available options that the tax office provides. The ATO has reassured that they will find a tailored approach per each situation.

The Tax Office has also urged accountants to ensure clients continue to lodge quickly even if they are unable to pay, with tailored payment plans still available to them.

If you have overdue obligations or are worried about compliance action, please give us a call and we will work with you to find a solution.

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